Sunday, August 31, 2014

the key releases of the past week were the 2nd estimate of 2nd quarter GDP from the BEA on Thursday, and the BEA report on personal Incomes and spending for July on Friday, which gives us the largest component of 3rd quarter GDP for the month....other widely watched reports included new home sales for July released on Monday, and the Case-Shiller house price indexes and the Census report on orders, shipments, and inventories of durable goods, both released on Tuesday....other reports included the the Chicago Fed National Activity Index for July (pdf), a composite index of 85 different economic metrics grouped into four broad categories of data, which rose to +0.39 in July from +0.21 in June.as 53 of the indicators were positive, indicating growth above trend....three of the four broad categories of indicators that make up the index made positive contributions in July: production related indicators added .0.31 to the index, employment-related indicators added 0.13, sales, orders, and inventories added 0.05, while the the consumption and housing category subtracted 0.10 from the overall reading for July...we also saw the release of three regional Fed manufacturing surveys; the August Texas Manufacturing Outlook Survey from the Dallas Fed indicated somewhat slower expansion in the district as its broadest business index slipped from 12.7 in July to 7.1 in August as the production index fell from 19.1 to 6.8, in indices where positive readings indicate expansion....then the Richmond Fed, reporting for a District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported slightly faster growth in August as the Fifth District manufacturing composite index rose to 12, up from a reading of 7 in July, as new orders and shipments both rose...in addition, the Kansas City Fed, surveying an region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported that Growth in Tenth District Manufacturing Activity Slowed Slightly (pdf) as their August composite index fell to 3 in August from 9 in July as manufacturers of non-durable goods slowed somewhat...

2nd Quarter GDP Growth Rate Revised to 4.2%

the Second Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 4.2% rate in the second quarter, revised from the 4.0% rate reported last month, as fixed investment and net exports were revised up and inventories were revised down...in current dollars, our 2nd quarter GDP would extrapolate to $17,311.3 billion annually, up 1.57%, or at a 6.4% annual rate from the $17,044.0 billion annualized figure of the 4th quarter...however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage calculations in this report are based....the resulting inflation adjustment used in the second quarter, aka the "GDP deflator", implies annual inflation at a 2.1% rate, up from the annualized 2.0% inflation factor previously reported for the second quarter, and up from 1.3% GDP deflator applied to GDP in the 1st quarter...while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they're expressed as a change a bit over 4 times of the change that actually occurred over the 3 month period...

while the net growth of real personal consumption expenditures was unchanged from the 2.5% annual rate of increase reported in the first estimate, that was a coincidence of the downward revision of real non-durable goods consumption balancing the revised increase in real outlays for services....even so, real personal outlays for durable goods rose at an 14.3% annual rate in the quarter and added 1.00% to GDP, up from the 14.0% growth rate first reported, boosted in part by a negative 1.8% price deflator...deflation adjusted consumption of motor vehicles, which grew at a 19.9% annual rate, accounted for almost half of the increase in consumer spending for durables and added 0.47% to 2nd quarter growth, while real outlays for durable household equipment and furniture rose at a 12.6% annual rate and added 0.20% to GDP, and real spending for recreational goods and vehicles rose at a 8.9% rate and contributed 0.26% to the quarter's growth rate...meanwhile, real personal spending for non-durable goods rose at a 1.9% rate, down from the previous estimate of a 2.5% growth rate, as inflation adjusted food and beverage outlays fell at an inflation adjusted 1.5% annual rate and inflation adjusted energy goods consumption fell at a 3.9% annual rate...so while the increase in real consumption of clothing and all other core non-durable goods added .46% to GDP, the decrease in real outlays for food subtracted .08% and the decrease in energy goods consumption subtracted .09%...real consumption of services, however, grew at an 0.8% rate and added 0.40% to the quarter's growth, revised from the 0.7% growth rate and 0.31% addition reported last month, as real outlays for housing and utilities contracted at a 3.4% rate but only partially offset modest growth in real outlays for health care, financial services, transportation services, food services, recreation and other services..

seasonally adjusted real gross private domestic investment grew at a 17.5% annual rate in the 2nd quarter, an even stronger clip than the 17.0% that was first estimated, as the growth rate of private fixed investment was revised to 8.1% from the 5.9% estimate of last month and thus added 1.25% to the 2nd quarter's growth rate...real non-residential fixed investment grew at a 8.4% rate, rather than the 5.5% previously estimated, as investment in non-residential structures was revised from growth at a 5.3% rate to growth at a 9.4% rate, which added 0.26% to the quarter's GDP growth...in addition, investment in equipment grew at a 10.7% rate, not the 7.0% rate previously reported, and added 0.59% to 2nd quarter growth, and the quarter's investment in intellectual property products was revised from a growth rate of 3.3% to a 4.4% growth rate and added 0.17% to the annualized change in growth for the quarter...residential investment was the only category of fixed investment to see a slight downward revision, as it grew at a 7.2% rate, not the 7.5% reported last month, and as a result added 0.22% to economic growth in the 2nd quarter...

meanwhile, the real (inflation adjusted) change in private inventories was also revised down, as they grew by an inflation adjusted $83.9 billion, revised from the $93.4 billion increase reported previously, and hence there was a $48.7 billion change in inventory growth from the first quarter's increase of $35.2 billion, which added 1.39% to the quarter's growth rate...since higher inventories are indicative of produced goods that have not been shipped or sold, their increase by $47.8 billion means real final sales of GDP were less than the headline figure by that amount and thus are recorded rising at a 2.8% rate in the 2nd quarter..

the figures for the change in our real 2nd quarter net trade figures were revised as well, roughly in line with our estimates in reporting on the June trade report, which was released a week after the 1st estimate....the BEA originally estimated that our 2nd quarter exports had increased at an inflation adjusted 9.5% annual rate while imports rose at a 11.7% rate, for an increase in the trade deficit over the 1st quarter that subtracted 0.62% from the 1st estimate of 2nd quarter GDP...with the revision including corrected June data, we now find that 2nd quarter exports have increased at 10.1% rate, while growth in imports was slightly smaller than the original estimate at 11.0%...as you should recall, exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here...thus the increase in real exports added 1.31% to 2nd quarter growth, while the nominally larger change in real imports subtracted 1.74% from the 2nd quarters's GDP...

finally, there were only minor revisions to real government consumption and investment in this 2nd estimate...real federal government consumption and investment shrunk at a 0.9% rate vis a vis the first quarter, revised from 0.8% lower, as real federal spending for defense grew at a 0.9% rate and added 0.04% to GDP, rather than the 1.1% growth rate and 0.05% addition previously published, while.all other federal consumption and investment fell at a 3.7% rate, which was unrevised, and which subtracted 0.10% from GDP...real state and local outlays rose at a seasonally adjusted 2.9% rate, rather than the the 3.1% increase previously reported, as real state and local investment rose at a 11.1% rate and added 0.20% to GDP while state and local consumption expenditures rose at a 1.3% rate and added 0.12% to 2nd quarter growth...

our FRED bar graph below, which can also be viewed as an interactive, has been updated with these latest GDP revisions…each color coded bar shows the change, in billions of chained 2009 dollars in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph below, the quarterly changes in real personal consumption expenditures are shown in blue, the quarterly changes in gross private investment, including structures, equipment and intangibles, are shown in red, the change in imports are shown in green, the change in exports are shown in purple, while a component of investment, the quarterly change in private inventories is in yellow..then the change in state and local government spending and investment is shown in pink, while the change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line....

Personal Income Rises 0.2% in July as Spending Falls 0.1%

the other key monthly release this week, also from the Bureau of Economic Analysis, was on Personal Income and Outlays for July, which in addition to the important personal income data, also reports the monthly data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP...from that data, the BEA also computes personal savings and the national savings rate, as well as a price index for PCE, the inflation gauge the Fed targets and which is used in this report to adjust both personal income and consumption expenditures for inflation to arrive at 'real' change figures....like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the actual monthly dollar changes, which are not reported, are thus on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, so it's frequently misreported that way...

in July, total personal income increased at a seasonally adjusted and annualized $28.6 billion rate to what would be a gross national annual income of $14,799.0 billion, which was 0.2% higher than in June, when personal income increased by 0.5% over May...disposable personal income (DPI), which is total income after taxes, increased at an annualized rate of $17.7 billion to $13,061.1 billion annualized, which was also a 0.2% increase over June, while June's DPI was also up 0.5% over May...increases in private wages and salaries accounted for $12.9 billion of the July personal income gain, with $12.3 billion of that increase seen in service industry payrolls, as manufacturing payrolls were unchanged...increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $3.7 billion of July's annualized increase, while employee contributions for government social insurance, which is subtracted from the personal income figure, increased at a $2.0 billion rate...meanwhile, proprietors' income decreased at a $2.7 billion rate in July, as a $9.0 billion decrease in farm owners incomes more than offset a $6.3 billion increase in incomes of individual proprietors of other types of business....other sources of the July personal income increase included rental income of individuals, which increased at a $5.5 billion clip in July, personal interest and dividend income, which increased at a $1.4 billion rate, and personal transfer payments from government programs, which increased at a $8.1 billion rate..

meanwhile, seasonally adjusted personal consumption expenditures (PCE), which were a major positive factor in the 2nd quarter GDP data we reviewed earlier, fell at a $13.6 billion annual clip to $11,900.5 billion in July, which was 0.1% lower than June and an ominous start to the 3rd quarter....personal outlays for services were down at a $1.1 billion rate to an annualized $7,923.4 billion, personal spending for durable goods fell at a $9.1 billion rate to $1,298.4 billion annually, while personal consumption of non-durable goods fell at a $3.4 billion annual rate to an annualized $2,678.7 billion.....total personal outlays, which includes interest payments, and personal transfer payments in addition to PCE, fell by an annualized $12.0 billion in July to $12,322.0 billion, in contrast to the increase of $51.2 billion in June outlays....however, the lower outlays left personal savings, which is disposable personal income less total outlays, at $739.1 billion for the month, up from savings of $709.4 billion in June...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.7% in July, up from 5.4% in June...

while personal consumption expenditures accounted for 68.2% of our 2nd quarter GDP, before they were included in the computation of the change in real GDP they were first adjusted for inflation...that's done with the price index for personal consumption expenditures which is computed here, which is a chained price index based on 2009 prices = 100....that index rose to 109.114 in July from 109.023 in June, giving us a month over month inflation rate of 0.08% and a year over year PCE price index increase of 1.61%; as a result, inflation adjusted or real personal consumption expenditures fell by 0.2% July after rising 0.2% in June, which would indicate a negative PCE contribution from July to GDP for the coming third quarter (since real PCE in April and May was relatively flat)....using the same PCE price index, disposable personal income is deflated to show that real disposable personal income, or the purchasing power of disposable income, rose just 0.1% in July, after 0.3% real increases in each of the three previous months..

our FRED graph below, which can also be viewed as an interactive, shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the scale in chained 2009 dollars for both on the left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right...the spike in income and savings at the end of 2012 was a result of bonuses and income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….although it may appear from the graph that real disposable income has been accelerating over the past 13 years, real DPI as shown below is not adjusted for increases in the population; on a per capita basis, real DPI is up just 20.7% over the span of this graph…

Backlog of Orders for Durable Goods Up 5.4% in July, 12.4% More than a Year Ago

an unusually large number of orders for the costly new Boeing 777Xs in July skewed the widely watched new orders for durable goods for the month, rendering the headline increase a one time phenomena which will likely be reversed when new orders return to a normal pace... the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau estimated that new orders for manufactured durable goods rose by a seasonally adjusted $55.3 billion, or 22.6%, to $300.1 billion, a new all time high, after rising by 2.4% in June...the increase was driven by an increase in new orders for transportation equipment, which were up $56.6 billion to $133.0 billion, which in turn was driven by a 318.0% increase to $70,281 million in new orders for commercial aircraft ...new orders excluding transportation equipment actually fell 0.8%, while the important new orders for capital goods less aircraft fell 0.5% to $72,639 million...meanwhile, seasonally adjusted July shipments of durable goods, which will be reflected in 3rd quarter GDP, increased by $8.0 billion or 3.3% to a new record $248.9 billion, with shipments of automotive equipment, up $4.8 billion or 10.4% to $50,935 million, leading the increase....in addition, seasonally adjusted inventories of durable goods, which have been up 15 out of the last 16 months, rose $2.1 billion or 0.5% to a record $401.9 billion, with a 1.2% increase to $73,370 million of commercial aircraft inventories, which are now 15.3% higher than they were a year ago, leading the increase...finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, increased by $59.2 billion or 5.4% to a record $1,158.5 billion ...with their long lead times, commercial aircraft orders, which were up 11.2% at $565,769 million, are a large part of this aggregate, but even without transportation equipment, unfilled orders still increased by 0.5% to $420,089 million, with unfilled orders for non-defense capital goods up a solid 1.1% to $248,439 million...overall, unfilled orders for durable goods were 12.4% ahead of last year's backlog...

New Home Sales Continue at Below a 450,000 a Year Pace

according to the Census bureau report on New Residential Sales for July (pdf), new single family homes sold at a seasonally adjusted annual rate of 412,000, which was 2.4 percent (±11.9%)* below the revised June sales rate of 422,000 homes a year, but was 12.3 percent (±17.1%)* above the 367,000 a year pace that new homes were selling at in July of last year... the asterisks indicate that based on their small sampling, Census could not be certain whether July's new home sales rose or fell from those of June or even from those of a year ago, but they're 90% confident that July home sales rose less than 9.5% or fell less than 14.3% from those of June, and that new homes could have sold as many as 29.4% more than last JUly or as few as 6.8% less than last July, a range of uncertainty to be expected in this report which has the largest margin of error of any census construction series....the unadjusted data from Census field reps estimated that 37,000 homes sold in July, down from 40,000 in June, which was revised from the original estimate of 38,000, while May's unadjusted sales were revised back up to 43,000, after they were revised down from 49,000 to 42,000 last month...of the 37,000 homes sold in July, 13,000 were completed, 13,000 were under construction, and 13,000 had not yet been started...the median new home sales price was $269,800, in July, down from $280,100 in June; while the average sales price was $339,100, up from June's $332,100 average, as more homes sold for under $200,000 or over $750,000 in July than in June...the Census estimated that a seasonally adjusted 205,000 new homes remained unsold at the end of July, which was a 6.0 month supply at the July sales pace, down from a 5.8 month supply in June...the FRED graph below show the historical data from this Census report, with the monthly sales reported as an annualized figure…note that new home sales have been stuck in a monthly range that would result in between 400,000 and 450,000 homes being sold annually since the end of 2012...

June Case-Shiller Report Shows Home Prices Rising 8.1% Year Over Year

the release of the Case-Shiller Home Price Index for June includes their 2nd quarter National home price index, comparing prices for repeat sales of homes over the 2nd quarter to the 1st quarter, in addition to the usual monthly 10 city and 20 city indexes which compare home prices of the three month period of April to June vis a vis the 3 month period from March to May...for June, they reported both the 10-City Composite and the 20-City Composite Index increased by 1.0% for the month, while both Composites posted annual home price increases of 8.1%, in contrast to year over year gains of 9.4% for the 10-City Composite and 9.3% for the 20-City Composite last month...meanwhile, the 2nd quarter national index indicated that prices were up 0.9% in June and 6.2% from the 2nd quarter of last year...all 20 cities saw home prices rise for the month; the largest one month home price increases were registered in New York City at 1.6%, while Chicago, Boston and Las Vegas saw home prices rise 1.4%; meanwhile, at the low end San Francisco saw just a 0.3% in their home price index.....the largest year over year home price increases were seen in Las Vegas at 15,2%, San Francisco at 12.9%, Los Angeles at 10.5% and Detroit at 10.3%, while Cleveland, where prices rose 0.8%, Charlotte, where prices were up 3.8%, and New York, where prices rose 4.5%, were the only cities showing an annual home price increase of less than 5%...

included below are the pair of interactive FRED graphs we created to show the historical track of home price indexes for each of the cities in the 20 city index, which are all based on 2000 home prices equal to 100.0... in our first FRED graph, we show the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles in beet red... for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the home price index values for each of them for the June report in our screenshot…

our second FRED graph of the Case-Shiller city indices shows the the historical price track of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…the S&P Case-Shiller index is not seasonally adjusted, but we notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced and the index values for each viewed over time with their interactive tool…

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, August 24, 2014

the most widely watched release of this past week was that of the July consumer price index from the BLS, while on real estate the week also saw the July report on new home construction from the Census bureau and the July report on existing home sales from the National Association of Realtors...on manufacturing, the data firm Markit released its preliminary or "flash" Manufacturing Purchasing Managers Index for August (pdf), a diffusion index which rose to 58.0 from 55.8 in July, which was its highest reading since April 2010, as new export business expanded at its fastest pace in three years, orders and new orders both increased at a faster pace than July, and employment grew at its fastest pace since March 2013...earlier, the Philadelphia Fed released their August Manufacturing Survey (pdf) covering Pennsylvania and southern New Jersey, which reported their broadest diffusion index of current activity increased from a reading of 23.9 in July to 28.0 in August, while the index for the six month outlook of manufacturing executives in their district rose to a 22 year high at at 64.4, in a diffusion index where any positive number suggests expansion...

July Food Prices Rise 0.4% as Overall Inflation Slows to 0.1%

consumer inflation slipped to the slowest pace in 5 months in July as modest price increases in food and services offset generally lower prices for energy and other commodities...the Consumer Price Index for All Urban Consumers (CPI-U) for July from the Bureau of Labor Statistics showed that seasonally adjusted prices rose by 0.1%, down from a 0.3% increase in June, as prices for gasoline, which rose in June, fell back in July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, was actually lower, falling to 238.250 in July from 238.343 in June, as overall prices normally fall slightly in July, but the index still remained 2.0% higher than the 233.596 reading from July of last year….with food price increases offsetting decreases in energy prices, core prices, which exclude those volatile components, were also up just 0.1%, as the unadjusted core index fell from 238.157 in June to 238.138 in July, while it was 1.9% ahead of its year ago level of 233.792...

the seasonally adjusted food index rose by 0.4% in July, after rising 0.1% in June, 0.5% in May and 0.4% in April, and it is now 2.5% higher than July a year ago....prices for food away from home rose 0.3% as prices for meals at full service restaurants rose 0.4% and prices at fast food restaurants were 0.3% higher, while prices for food at schools were unchanged after rising 1.3% in June, and prices for other food away from home fell 0.1%.... meanwhile, the price index for food at home rose 0.4% as no major food group fell in price....cereal and bakery products averaged 0.4% higher than in June, as a 1.2% increase in prices for rice, pasta and cornmeal and a 0.7% increase in the price of white bread was only partially offset by a 1.0% decrease in prices for sweetrolls, coffeecakes, doughnuts and a 0.6% decrease in prices for flour and prepared mixes...prices in the meats, poultry, fish, and eggs group rose 0.3% as egg prices rose 0.9% and chicken prices rose 0.5% while overall pork and seafood prices were unchanged and 0.4% lower ground beef prices partially offset a 1.6% increase in prices for beef roasts...on a year over year basis, overall beef prices still remained 10.4% higher and overall pork prices averaged 10.9% higher than last July....dairy products prices were also 0.3% higher in July than in June even though ice cream was 0.6% lower and cheese prices fell 0.2% because whole milk prices rose 0.2% and other dairy products rose 1.3%....meanwhile, the fruit and vegetable price index was unchanged in July as 1.8% lower prices for citrus fruits, 1.7% lower priced lettuce, 1.6% lower potatoes, and 1.5% lower apples were offset by 3.7% higher prices for other fresh fruit and 1.3% higher prices for frozen fruit and vegetables....however, prices for the beverage group rose 0.5% as a 1.1% increase in the price of roast coffee was partially offset by prices for non-alcoholic drinks and that were on net unchanged...in addition, prices for other foods at home rose 0.7% as butter prices were 2.8% higher, olives, pickles, and relishes rose 1.0%, and baby food rose 0.8% while peanut butter prices fell 1.9%... combined with a June increase of 4.2%, butter prices are now 16.5% higher than a year ago...

the seasonally adjusted energy price index was 0.3% lower in July as prices for energy commodities fell 0.3% while the index for energy services fell 0.4%...the decrease in energy commodity prices was anchored by a a 0.3% drop in the price of gasoline, the largest component, while fuel oil prices fell 0.7% and prices for other fuels, including propane, kerosene and firewood averaged a 2.7% increase….within energy services, the index for utility gas service fell for the 3rd consecutive month, as it was down another 0.4% after falling 2.6% in June and 1.7% in May, while the electricity price index fell 0.3% in July after rising 0.2% in June...

looking at the seasonally adjusted core components of the CPI, we find that the supergrouping of commodities less food and energy commodities was unchanged in July, while overall services less energy services saw a 0.1% increase....the index for shelter, which is almost 32% of the CPI, rose 0.3%, with rent of shelter rising 0.3%, homeowner's equivalent rent rising 0.3%, prices for lodging away from home rising 0.2%, while water & sewer bills rose 0.6% and the cost of household operations rose 0.4%....meanwhile, household furnishings and supplies, the commodity component of housing, fell 0.4% with prices for bedroom furniture, living room furniture, kitchen and dining room furniture, cookware and tableware, and window coverings all seeing prices decrease more than 1.3% in July.....the price index for apparel, now up three months in a row, rose 0.2% in July as a 2.2% increase in footwear prices and an 0.8% in prices for men's clothing was partially offset by a 1.0% decrease in women & girls apparel, with women's outwear seeing prices fall 4.6% while their prices since last July were still up 12.3%....the aggregate index for medical care increased by 0.2% as medical care commodities rose 0.3% after being up 0.7% in June on another 0.5% increase in prescription drug prices, while medical care services rose by 0.1% overall as 0.5% increases in both inpatient hospital services and outpatient hospital services was offset by a 0.5% drop in prices for eyeglasses and eyecare, 0.2% lower prices for physicians' services and 0.2% lower costs for health insurance...while the transportation composite index showed a 0.3% decrease, that index includes gasoline, which fell 0.3%; transportation commodities less fuel prices, however, were 0.1% higher, as prices for new cars and trucks rose 0.3%, prices for used cars & trucks fell 0.3%, and the price of tires rose 0.2%...however, the transportation services index fell 0.2% on a 2.1% drop in prices for car and track rentals while airfares were 0.4% higher than in June... meanwhile, the recreation index fell 0.1% as recreation commodities fell 0.8% on another 1.9% decrease in TV prices, while prices for audio equipment fell 3.0%, prices for photographic equipment fell 1.9%, prices for discs & tapes & similar media fell 1.5%, and prices for pets and pet products fell 0.9%, while recreation services rose 0.2% as a 2.0% decrease in rental of video and audio media was more than offset by 0.6% higher club fees, 0.8% higher theater and concert ticket prices, and 0.4% higher film processing......finally, the aggregate education and communication index was unchanged as education and communication commodities fell 0.2%, mostly on a 1.0% decline in prices for personal computers and peripheral equipment, while education and communication services rose 0.1% on a 0.4% increase in elementary and high school tuition and fees and a 0.4% increase in postage and delivery services....other than the aforementioned increases in food prices and women's outerwear, the only other line item among CPI components that showed an annual price change greater than 10% was televisions, which are now 15.0% cheaper than they were a year earlier...

our FRED graph below shows the monthly change in each of the major component indexes of the CPI over the past year, with increases in prices above the dark “0” line and price decreases below it...each group of 7 color coded bars represents one month of CPI component changes, where blue shows the monthly change in the price index for food and beverages; red shows the change in the price index for all housing components, which includes rent, homeowners equivalent rent, utilities, insurance & household maintenance; mauve shows the percentage change for apparel prices, orange shows the change in the index for medical care, light green shows the change in the transportation composite, obviously volatile as it includes gasoline, while dark green shows the monthly change in the price index for education and communication and light blue shows the change in the recreation price index…this graph can also be viewed as an interactive, wherein you can expand the view to show price changes in each of these indexes going back to 1947...

Housing Starts and Building Permits Increase in July

the Census report on New Residential Construction for July (pdf) gives us broad estimates of new housing permits, new housing starts, and housing completions based on a survey of a small percentage of permit offices visited by Census field agents, and is widely watched and reported on for new housing starts....in July, starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,093,000, which was 15.7 percent (±10.9%) above the revised June estimate of 945,000 annually, and 21.7 percent (±10.7%) above the annual rate of 898,000 housing starts estimated in July a year ago...the numbers in parenthesis means that Census is 90% confident that housing units started in July were at a seasonally adjusted rate between 4.8% and 26.5% greater than the pace in June, and between 11.0% and 32.4% greater than the pace of a year ago...the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 101,000 total units were started in July, up from 90,500 in June, with 61,600 of those single family dwellings...meanwhile, construction was started on 38,200 apartment units in buildings with 5 or more units, a 25 year high for apartment unit starts, with the caveat that the margin of error on that apartment data is ± 33.8%...with this release, previously reported single family starts in June were revised up from 58,500 to 62,200 while units started in buildings with more than 5 units were revised from 25,700 to 26,600...

the monthly data on new building permits have a much narrower margin of error that new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often revised starts data... in July, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,052,000, which was 8.1 percent (±1.8%) above the revised June annual rate of 973,000 and 7.7 percent (±1.8%) above the 977,000 annual rate estimated for new permits in July of last year...those estimates were extrapolated from the unadjusted estimate of 97,100 new permits issued in July, which was up from the estimated 92,300 permits issued in June...of those units permitted in June, 61,000 (±1.1%) were for single family homes, and 33,200 (±1.0%) represented permits for housing units in building with 5 or more units...our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…note that the number in thousands shown monthly for both metrics is an estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months…

Existing Homes Selling at a 5.15 Million a Year Clip in July

according to the July report on existing home sales from the National Association of Realtors, 5.15 million homes would sell annually if July's seasonally adjusted home sales were extrapolated at the same rate over an entire year; those adjusted sales were up 2.4% from the downwardly-revised seasonally adjusted annual rate of 5.03 million completed home transactions in June, but still 4.3% below the 5.38 million-unit annual sales rate of July last year...before the seasonal adjustment and conversion to an annualized figure, an estimated 494,000 homes sold in July, down 2.4% from the estimated 506,000 homes that sold in June, and down 4.8% from the estimated 519,000 homes that sold in July a year ago...while seasonally adjusted data indicates that homes sales increased in every region of the country except the Northeast, where they were statistically unchanged, the unadjusted data (pdf) indicates that homes sales were down in every region of the country except the Northeast, where they were up 14.3%...

the median home selling price for all housing types was $222,900 in July, up 0.4% from the downwardly revised median price of $222,000 in June and 4.9% higher than the $212,400 median sales price in July of last year, in home price data that is not seasonally adjusted…the average home sales price was $268,700, up from $268,100 in June and $259,000 in July a year ago, with regional average home prices ranging from $342,800 in the West to an average of $210,200 for homes sold in the Midwest...foreclosed homes, which sold for an average of 20% below the price of similar homes in their market, accounted for 8% of June sales, while short sales, at 3% of the total, were discounted by an average of 11%...sales of distressed properties were the lowest portion in 6 years; foreclosed homes, which sold for an average of 20% below the price of similar homes in their market, accounted for 6% of July sales, while short sales, at 3% of the total, were discounted by an average of 14%.....the pie graph below, taken from an NAR graphic summary of July data, shows the percentage of homes sold in in July in each of several prices ranges; while it’s obvious most homes were sold for below $250,000, those selling for over $500,000 still accounted for a substantial 12% of all sales..

the median time on the market for all homes was 48 days in July, up from 44 days in June, and up from a median of 42 days on the market in July a year ago…those who bought houses with cash accounted for 29% of transactions in July, down from 32% of sales in June and the lowest percentage of all cash transactions for any month since January 2013...those identified by realtors as investors accounted for 16% of all transactions, unchanged from May and also unchanged from the 16% investor share of sales a year earlier...the percentage of first time home buyers rose for the second month in a row to 29% in July, from 28% in June, as interest rates for a 30 year mortgage averaged 4.13% in July, down from 4.16% in June; and the lowest average mortgage interest rate in 14 months...an inventory of 2.37 million existing homes remained available for sale at the end of July, which would be a 5.5-month supply of unsold homes at the July sales pace, unchanged from June but up from 2.24 million, or a 5.0 month supply in July a year earlier...

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, August 17, 2014

in contrast to last week, when all of the releases covered June data, the most important releases this week were on July data, giving us our first look at the economy in the 3rd quarter...the major releases this week were the July advance report on retail sales from the Census Bureau, the July G17 on industrial production from the Fed, and the July producer price index from the BLS...in addition, we also saw the 2nd quarter report on household household debt and credit from the NY Fed, and the June Job Openings and Labor Turnover Survey, a report that's gained a following after it was cited by Janet Yellen as including key employment indicators she follows....this week also saw the first regional survey on manufacturing from Fed District banks; on Tuesday, the August Empire State Manufacturing Survey from the New York Fed, polling manufacturers in New York and northern New Jersey, reported that their broadest diffusion index for general business conditions fell 11 points from the 4 year high of 25.6 in July to 14.7 in August, still indicating growth for the month, in an index where any positive number indicates expanding business for area manufacturers..

also, in the last major June report which will likely result in negative revisions to 2nd quarter GDP, the Census Bureau released the Manufacturing and Trade Inventories and Sales report for June, commonly covered as the business inventories report, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments increased by 0.3 percent (±0.2%) from May to $1,346.7 billion in June, which was 4.7 (±0.6%) above the total monthly sales level of June of last year; manufacturers sales were estimated at $499,828 million, retailer's sales were estimated at $392,456 million, and merchant wholesalers accounted for $454,447 million of the overall total....meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.4 percent (±0.1%) from May to a seasonally adjusted $1,743.1 billion in June, which was up 5.8 percent (±0.4%) from June a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $653,775 million, inventories of retailers were estimated to be valued at $555,825 million, and inventories of wholesalers were estimated to be valued at $533,486 million at the end of June...the month end total business inventories to total sales ratio, a metric which is watched to determine if inventories are becoming excessive, was at 1.29, unchanged from May and up fractionally from 1.28 in June a year ago..

July Retail Sales Flat with 0.2% June Increase Unrevised

the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $439.8 billion for the month, virtually unchanged (±0.5%)* from June's sales of $439.8 billion, which themselves were unrevised with a gain of of 0.2 percent (±0.2%)* over May sales; July's sales were also estimated to be 3.7 percent (±0.9%) above those of July a year ago...before the seasonally adjustment, July estimated sales, extrapolated from surveys of a small sampling of retailers, were reportedly at $446,251 million, up from $438,735 million in June but down from $464,429 million in May, and up 4.2% from $428,090 million in July a year ago....

as you can see, the weakness in July sales is evident across most business types, with only the miscellaneous store retailers, who account for less than 2% of the total, managing a monthly gain as large as 0.9%... the seasonally adjusted 0.2% decline in motor vehicle and parts sales to $87,640 million was a drag on sales overall, but even without the decrease in sales from the automotive sector, retail sales still only managed a 0.1% increase....food and clothing sales provided some stability; clothing store sales were up 0.4% to $21,205 million, food and beverage store sales were up 0.3% to $49,558 million, and sales by restaurants and bars were up 0.2% to $47,281 million...meanwhile, general merchandise store sales were off 0.5% to $55,155 million, while non-store or online sales slipped 0.1% to $39,768 million, with electronic and appliance stores both showing sales down by the same margin...

while overall retail sales for June were little revised, several of the retail groups saw significant revisions in their reported sales for the month... building material and garden supply outlets, which were reported with 1.0% lower sales in June, have been revised to show a 1.0% gain for the month; June sales at bars and restaurants were also reversed, from a decrease of 0.3% to an increase of 0.2%...in addition, food and beverage stores were revised from an increase of 0.4% to an increase of 0.9%, while miscellaneous stores sales were revised from up 0.1% to up 0.9%...meanwhile, sales at general merchandise stores had been reported up 1.1% and they've been revised to a 0.4% increase, and clothing store sales were revised from an increase of 0.8% to an increase of 0.2%, while sales at gas stations, which were first reported 0.3% higher, have been revised to indicate they were 0.8% lower...

Industrial Production Increases 0.4% in July as Capacity Utilization Edges Up 0.1% to 79.2%

the Fed's July release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% over a June reading which was revised from an increase of 0.2% to an increase of 0.4% as the May to June increase was revised from a 0.5% increase to a 0.3% increase...the industrial production index itself, which is benchmarked to 2007 production equal to 100.0, rose to a record high 104.4 from an unrevised June index level of 103.9, while May's industrial production index was revised from 103.7 to 103.5...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 1.0% in July to 100.7, the highest since November 2007 and first time that index has exceeded 100.0 since January 2008; in addition, the manufacturing index for June was revised up from 99.7 to 99.8 and the index is now 4.9% higher than the level of July 2013..... meanwhile the seasonally adjusted utility index, reflecting a milder than normal July in most of the country, fell another 3.4% in July after falling 0.7% in June and at 96.9 is now 9.7% below the levels of January, when it first spiked 4.1% due to the colder than normal weather...rounding out the industry groups, the mining index, which includes oil & gas production, increased by 0.3% to 130.5 in July, after increasing a revised 1.3% to 130.1 in June, and is now 8.6% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group...among final products and nonindustrial supplies, which rose by 0.6% in July, seasonally adjusted production of consumer goods rose by 0.5% after rising a revised 0.2% in June; production of consumer durables rose 4.7% on an 8.5% increase in the output of automotive products, which are now up 19.8% year over year, while production of appliances, furniture and carpeting rose 1.8% in July and output of home electronics was 1.5% above June production...meanwhile, production of non-durable goods was down 0.7% for the month on a 1.5% drop in energy output and a 0.4% drop in production of non-energy non-durables...of the later, clothing production was up 2.0%, while output of paper products fell 1.4%, production of food was 0.6% lower, and output of chemical products was unchanged....since last July, production of durable goods had increased by 12.0%, led by the increase in automotive production, and production of non-durable goods has risen 2.1% on a 5.0% increase in clothing output, while output of consumer energy products has increased 2.7%..

meanwhile, seasonally adjusted production of business equipment rose 1.3% in July after falling by a revised 0.3% in June as production of transit equipment rose 3.9% while production of information processing equipment rose 0.1% and production of industrial equipment rose 0.7%...for the year ending July, output of business equipment rose by 7.0% on the strength of an 11.7% increase in production of transit equipment, while output of industrial equipment rose 6.9% and production of information processing equipment rose 1.7%...in addition, production of defense and space equipment rose by 0.9% in July and grew by 4.3% over the year...in addition, production of supplies for use in construction rose 0.8% for the month and was 5.3% ahead of year ago output, while production of business supplies was unchanged for the month and up 2.2% for the year...meanwhile, production of raw and intermediate materials that would input into other production processes rose by 0.3% in July with output of consumer parts, equipment parts, and textiles all rising by more than 1.0%, with only output of energy materials falling by 0.6%...for the year, production of intermediate materials was up 5.5% with a 14.8% increase in parts for consumer goods leading production of intermediate durable goods to an 8.5% year over year increase..

with industrial production increasing 0.4% in July, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise rose, but by just 0.1%, from 79.1% in June to 79.2% in July, suggesting new capacity was added during the month...77.8% of our total manufacturing capacity was in use during July, up from 77.2% in June, and up from the manufacturing utilization rate of 75.8% in July of last year...the operating rate for NAICS classified durable goods manufacturers was at 78.5% in July, up from 77.9%, led by an 84.8% operating rate for manufactures of electrical equipment, appliances, and components, while the July operating rate for NAICS classified manufacturers of non-durables was at 78.4%, up from 78.3% in June, with the oil and coal products industry operating at 82.8% of capacity while textile and textile product mills were only operating at a 70.2% rate.... meanwhile, capacity utilization by the 'mining' industry fell from 89.9% to 89.4%, reflecting the increase in oil and gas rig counts during the month; while the operating rate for utilities obviously fell with lower production, from 78.7% to 75.9%.......our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0…

July Producer Prices Inch Up 0.1% on Services

according to the Producer Price Index for July from the BLS, the seasonally adjusted producer price index for final demand rose 0.1% after rising 0.4% in June and falling 0.2% in May, and now indicates wholesale prices are 1.7% above year earlier levels...in July, the index for final demand for services rose by 0.1%, as the index for final demand of transportation and warehousing services, a measure of the margins received by such services, rose by 0.5%, while the margins for final demand trade rose 0.2%, while producer prices for services other than trade, transportation, and warehousing were unchanged, as a 1.9% decrease in prices for consumer loan services was offset by a 2.0% increase in portfolio management services....meanwhile, the price index for final demand for goods, aka 'finished goods', was unchanged after rising 0.5% in June, as a 0.6% decrease in the price index for final demand energy offset a 0.4% increase in the price index for final demand for food and a 0.2% increase in core wholesale goods...among wholesale finished food prices, oilseeds were priced 16.5% lower, fresh eggs were off 12.9%, grains were 12.2% lower, and producer prices for fish were 11.% higher inJune, while a 2.1% drop in wholesale gasoline prices was the major factor in the drop in energy prices...

this report also showed the price index for processed goods for intermediate demand rose 0.1%, as a 0.4% increase in intermediate processed foods and feeds and a 0.3% increase in intermediate core producer prices was offset by a 0.3% decrease in prices for intermediate processed energy goods....meanwhile, the price index for intermediate unprocessed goods fell 2.7% on a 0.4% drop in producer prices for for unprocessed foods and feeds and a 6.4% decline in the index for raw energy materials, while prices for unprocessed nonfood materials less energy were unchanged......finally, the price index for services for intermediate demand rose 0.3% in July, mostly on a 0.3% increase in the index for prices for services less trade, transportation, and warehousing for intermediate demand and a 0.5% increase in prices for transportation and warehousing services for intermediate demand...over the 12 months ended in July, the index for services for intermediate demand rose 1.7%...

2nd Quarter Household Debt Slips 0.2% with Delinquencies at a 7 Year Low

the New York Fed’s 2nd Quarter Report on Household Debt and Credit (pdf), indicated that total householddebt, including real estate debt, slipped by $18 billion in the 2nd quarter to $11.63 trillion, a 0.2% decrease from the 1st quarter debt level...mortgages, the largest component of the aggregate, fell by 0.8% or $69 billion to $8.10 trillion, and home equity lines of credit fell by $5 billion to $521 billion, a 1.0% drop, while non-housing debt rose by 1.9%, with increases in all categories, as auto loan balances increased by $30 billion; student loan balances increased by $7 billion; credit card balances increased by $10 billion, and other non-housing credit balances increased by $9 billion....while up 4.3% from the $11.15 trillion debt level of the 2nd quarter last year, aggregate household debt still remains 8.2% below the peak of $12.68 trillion reached in the 3rd quarter of 2008...

the first bar chart below from this 31 page graphic presentation shows the components of total household debt nationally for each quarter since the beginning of 2003, with each bar on the graph representing a quarter of a year, and within each bar is a color coded representation of the amount in trillions of dollars of each type of debt that was outstanding at the end of that given quarter…in each bar, orange represents the amount of mortgage debt that was outstanding at the end of that quarter, violet indicates the amount of home equity loans outstanding, green is the amount of auto loans outstanding, blue is unpaid credit card debt, red are student loans outstanding, and grey is ‘other’ debt outstanding in the quarter….we can see that the aggregate total debt outstanding has been increasing over the past year, despite being flat this quarter, andthat student loan debt has now expanded to 10% of the total, or one seventh of the amount of mortgage debt...note that although mortgage debt is considerably lower than at the peak, this report and its graphics does not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale....

>delinquency rates improved on all types of debt in the second quarter, with 6.2% of debt at some stage of delinquency, the lowest delinquency rate since the 3rd quarter of 2007, in contrast to an overall delinquency rate of 6.6% at the end of the first quarter...of the $724 billion of debt that was delinquent at the end of the quarter, $521 billion was classified as seriously derogatory, meaning it was more than 90 days past due...new delinquencies also fell, with just 1.2% of current mortgage balances transitioning into delinquency during the quarter, the lowest new mortgage delinquency rate since 2000....the next bar graph below uses the same color coding for the type of loans represented as the graph above and covers the same time period; in this one, each bar has a color coded representation of the amount of newly delinquent loans by type as they first became delinquent in each quarter; here we can see a pretty clear peak with over $400 billion of household debt becoming delinquent for the first time in the last quarter of 2008; we can also see that newly delinquent student debt, or the red in each bar, has become larger as time goes on, and also clearly see how newly delinquent mortgage debt in orange dropped seasonally in the most recent quarter, just as was noted by the MBA 2nd quarter delinquency survey last week…

June Job Openings at a 13 Year High

according to Job Openings and Labor Turnover Survey for June (JOLTS) from the Bureau of Labor Statistics, seasonally adjusted job openings rose by 92,000 to 4,671,000 in June, while jobs open at the end of May were revised down by 58,000 from the originally reported 4,635,000 openings to 4,577,000....job openings in professional and business services rose by 46,000 and job openings in retail sales rose by 22,000, while job openings in accommodation and food services fell by 56,000 in June after rising by 55,000 in May....job openings as a percentage of the employed labor force rose to 3.3% from 3.2% in May, up from 2.8% a year earlier and up from 2.7% in January...based on 9,474,000 officially unemployed in June, there would be 2.1 unemployed who were actually looking for work during June for every job opening; that, of course, does not count those who might have wanted a job but didn't look for work during the month...

this JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which include retirements and death.... in June, seasonally adjusted new hires totaled 4,830,000, up 92,000 from the 4,738,000 hired or rehired in May, as the hiring rate as a percentage of all employed rose from 3.4% to 3.5%, and up from 3.2% a year earlier...total hiring in the professional and business services category increased by 68,000 to 1,031,000 in June, while hiring in construction fell by 37,000 to 264,000....total separations also rose, from 4,530,000 in May to 4,547,000 in June, as the separations rate as a percentage of the employed remained unchanged at 3.3%, while it was up from 3.1% a year ago...subtracting the 4,547,000 total separations from the total hires of 4,718,000 would imply an increase of 283,000 jobs in June, slightly less than the revised payroll job increase of 298,000 for June reported by the BLS establishment survey two weeks ago, a difference not unexpected between these two surveys that both have wide confidence intervals...

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, August 10, 2014

the key economic release this week was on our international trade for June from the Commerce Dept, which appears will result in an upward revision to 2nd quarter GDP...the other monthly economic reports released this week were also on June data and included:

the Full Report on Manufacturers’ Shipments, Inventories, & Orders for June from the Census Bureau (pdf), which showed new orders for manufactured goods rose by $5.7 billion or 1.1% to a record high of $503.2 billion, factory shipments rose by $2.5 billion or 0.5% to a record $499.8 billion, factory inventories rose by $1.8 billion or 0.3% to a record high at $653.8 billion, and unfilled factory orders rose by $10.4 billion or 1.0% to $1,098.5 billion, which was also the highest level value of unfilled orders on record....

the Fed's G-19 report on Consumer Credit for June, which showed that seasonally adjusted consumer borrowing increased at an annual rate of 6.5% in June, or by $17.2 billion over May to $3,211.2 billion outstanding at the end of the month...revolving credit, which is mostly credit card debt, grew at an annual rate of 1.3%, increasing to $873.1 billion in May from $872.1 billion in May, while non-revolving debt, which includes long term borrowing for items such as cars and tuition, but not real estate, rose In June at an annual rate of 8.4% to a seasonally adjusted $2,338.1 billion in June from $2,321.8 billion in May...

the Wholesale Trade report on Sales and Inventories for June (pdf) from the Census Bureau, which estimated that seasonally adjusted sales of merchant wholesalers increased by 0.2 percent (+/-0.7)* to $454.4 billion for the month and by 6.5 percent (+/-1.8%) over the sales of June 2013, not adjusted for inflation, while seasonally adjusted wholesale inventories at the end of June were 0.3 percent (+/-0.4%)* higher than the downwardly revised May figure at $533.5 billion, a level 7.9% (+/-0.9%) higher than a year earlier...May's inventory increase was revised from a gain of 0.5% to a gain of 0.3%, implying a similar revision to 2nd quarter GDP..

in addition, the Institute for Supply Management published their July Non-Manufacturing ISM Report On Business, which generates diffusion indices resulting from their survey of service industry purchasing managers; their headline Non-Manufacturing Composite Index (MNI) came in at 58.7%, up from last month's 56.0% and a record high for this index, which was first published in January 2008...

Trade Deficit Falls 7.2% in June to $41.5 Billion

the June report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $41.5 billion for the month, down from the revised trade deficit of $44.7 billion in May, as our exports rose $0.3 billion to $195.9 billion on a $0.2 billion increase to $136.9 billion in our goods exports and a $0.1 billion increase to $59.0 billion in our services exports, while our imports fell $2.9 billion to $237.4 billion on a $2.9 billion increase to $197.2 billion in our imports of goods while our imports of services were virtually unchanged at $40.2 billion...the May trade deficit was revised up from the previously reported $44.4 billion...you may recall that in computing second quarter GDP last week, the BEA assumed an decrease in both exports and imports, so the larger than expected decrease in imports and small increase in exports both suggest upward revisions to 2nd quarter GDP, although the data isn't directly comparable, because all GDP amounts are inflation adjusted and at a seasonally adjusted annual rate vs the monthly data reported here...

factors in the May to June increase in exports included a $411 million increase in our exports of consumer goods to $17,158 million, largely on a $423 million increase in our exports of pharmaceutical preparations, and a $163 million increase to $13,654 million in our exports of automotive vehicles, parts, and engines; we also exported $42,232 million worth of industrial supplies and materials in June, $51 million more than May, as a $316 million increase in exports of organic chemicals and a $226 million increase in our exports of crude oil were mostly offset by $314 million lower exports of other petroleum products, $272 million less exports of natural gas, and a $234 decrease in exports of fuel oil...similarly, our exports of capital goods were up by just $33 million to $45,677 million as a $513 increase in our exports of civilian aircraft was offset by decreases of $278 million in our exports of telecommunications equipment and $179 million in other industrial machinery not itemized separately...meanwhile, our exports of food, feeds and beverages fell by $264 million to $11,701 million on a $324 million decrease in our exports of soybeans and a $109 million decrease in our exports of fish and shellfish, which was only partially offset by an increase of $117 million in our exports of nuts...in addition, our exports of goods not categorized by end use fell by $518 million to $5,120 million...

end use categories of imports that saw seasonally adjusted decreases in June included consumer goods, imports of which fell by $1,279 million to $45,793 million on a $1,124 million decrease in our imports of cellphones and similar household products, and automotive vehicles, parts, and engines, imports of which fell by $1,074 million to $27,466 million...at $55,268 million, we also imported $548 million less industrial supplies and materials in June, as a $381 increase in our imports of crude oil was more than offset by decreases of $594 million in our imports of fuel oil and $699 million in our imports of other petroleum products...our imports of capital goods fell by $259 million to $49,363 million on a $162 million decrease in imports of oilfield equipment, a $143 million decrease in telecommunications equipment imports, and a $124 million decrease in imports of industrial machinery not itemized separately, offset in part by a $343 million increase in imports of computers...meanwhile our imports of foods, feeds, and beverages rose by $235 million to $10,834 million on a $201 million increase in our imports of oils and oilseeds, while our imports of goods not categorized by end use rose by $36 million to $6,293 million....

our FRED bar graph below shows the monthly change in exports in blue and the monthly change in imports in red over the past two years, with the net of them resulting in the change in the balance of trade, which is shown in brown...each group of three bars represents one month’s of trade data, with positive changes above the ‘0’ line and negative changes below it; note that when exports (blue) increase in a given month, they add to the trade balance change in brown; and when exports decrease, they subtract from the brown trade balance bar, while the action of imports on the balance is just the reverse, ie, when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…the interactive version of this bar graph at FRED loads with 20 years of trade data, which you can view monthly by moving your cursor across the graph, or use the sliders across the bottom of the graph to adjust the time period viewed...

Mortgage Delinquency and Foreclosure Reports

we're also going to take a look at two private reports on the ongoing mortgage crisis that were released this week: the Mortgage Monitor for June (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) and the 2nd Quarter National Delinquency Survey from the MBA (Mortgage Bankers Association); both of these reports cover essentially the same data on home mortgages: those that are delinquent, or behind on their payments, and those that are in the process of being foreclosed...the Mortgage Monitor is a monthly report that we've covered monthly for several years, while the MBA National Delinquency Survey is only released quarterly and is seasonally adjusted based on patterns of mortgage delinquency that have repeatedly occurred annually...since both of these reports are of mortgage conditions as of the last day of June, comparing them side by side should give us a more complete picture into the ongoing mortgage crisis than looking at one or the other in isolation...

MBA Reports 6.04% of Mortgages Delinquent, 2.49% in Foreclosure at End of 2nd Quarter

according to the MBA, the seasonally adjusted national delinquency rate, which is the percentage of homeowners who were late at least one house payment late but not in foreclosure, fell to 6.04% of all mortgage loans outstanding at the end of the 2nd quarter, down from 6.11% at the end of the second quarter, and down from a delinquency rate of 6.96% at the end of the 2nd quarter a year ago, and also the lowest level since the first quarter of 2008...in addition, they report that 2.49% of all mortgage loans were in the foreclosure process at the end of the quarter, down from 2.65% at the end of the 1st quarter and from 3.33% at the end of the 3rd quarter last year, which was also the lowest percentage foreclosure inventory since 2008...new foreclosure actions were initiated on 0.40% of mortgages in the 2nd quarter, down from the 0.45% rate of new foreclosures in the 1st quarter...the serious delinquency rate, which combines the percentage of mortgages in foreclosure with those that are more than 90 days behind on their housepayments but still not in foreclosure, fell to 4.80% in the 2nd quarter from 5.04% in the 1st quarter, and was well below the serious delinquency rate of 5.88% a year earlier...combining those at least one payment overdue on their mortgage with those seriously delinquent or in foreclosure gives us a total percentage of 8.53% of homeowners who were behind on their mortgage at the end of the quarter, or still more than one in twelve...these percentages over time are illustrated visually in the bar graph below, from Bill McBride at Calculated Risk, which stacks the percentage of foreclosures in red on the top of each quarterly bar, which each also shows the number of more than 30 but less than 90 days delinquent each quarter in the blue portion of each bar, and the number of mortgages more than 90 days behind on payments in yellow...we can see on that graph that the percentage of mortgages in trouble peaked at 14.7% in the first quarter of 2010 and has been trending downward since, and although the total is still well above the levels of the pre-crisis year of 2005, the shorter term new delinquencies in blue are now at near normal levels...

Mortgage Monitor Finds Average Time in Foreclosure Approaching 1000 Days

in contrast with the MBA delinquency report, the Mortgage Monitor for June (pdf) from from Black Knight Financial Services (BKFS) shows that delinquencies have increased since their last report, with 5.70% of all mortgaged homeowners at least one payment overdue on their mortgage but not in foreclosure In June, up from 5.62% in May and up from 5.52% in March, the monthly report that would correspond with the MBA's 1st quarter delinquency survey...the difference is likely in the seasonal adjustments applied by the MBA, as it's well known that mortgage delinquencies peak around Christmas and fall into the spring, and that June usually sees an uptick...June delinquencies are still down nearly a full percent compared to June a year earlier, when the BKFS predecessor LPS gave the delinquency rate at 6.68%...of those delinquent but not in foreclosure in June, 1,155,114 mortgages were more than 90 days delinquent, aka "seriously delinquent" and 1,727,541 homeowners were more than 30 days but less than 90 days past due...

in addition to those homeowners who were simply delinquent, BKFS also showed that 951,348 home loans, or 1.88% of all mortgages outstanding, remained in the foreclosure process at the end of June, which was down from 966,062, or 1.91% of all active loans in May and down from 2.93% of all mortgages in June of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and May's so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since 2008...however, new foreclosure starts rose in June for the 2nd month in a row, as the 88,314 new foreclosures started in June was 2.38% higher than the 86,258 homes foreclosed on in May and 12.1% higher than the 78,796 foreclosures started in April...nonetheless, new foreclosures are still well off the pace of last year, as year-to-date foreclosure starts were at their lowest since 2007 and down 19% from a year ago...

the graph below, from page 7 of the Mortgage Monitor pdf, shows the percentage of mortgages that were in the foreclosure process monthly since 1995 in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble monthly in blue over the same period…we can see that the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 1.88% in June is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice they're still more than 4 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.70% of all mortgage outstanding in June, that count is nearly down to half of the 10.57% of mortgages that were delinquent but not in foreclosure at the peak of the mortgage crisis in January of 2010, but still somewhat above the December 2005 delinquency percentage of 4.27% noted on the graph...comparing this graph to the one from the MBA above, we can see that the overall trends are quite similar, but that the Mortgage Monitor totals have generally been slightly less in each category…also note the seasonality of mortgage delinquencies apparent in the track of the red graph below, wherein they usually begin to increase at the beginning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping...

as you'll recall, the monthly mortgage monitor is a largely graphic presentation of mortgage conditions with only 3 pages of summary data in table form (pages 21 through 23 in this month's pdf); the areas covered graphically in the June mortgage monitor include originations and prepayments, ie, new mortgages, and homeowners who are paying off their mortgage ahead of its term; delinquencies and foreclosure inventory, with a focus on judicial states, where foreclosures must proceed through the court; mortgage modifications, contrasting government HAMP modifications with proprietary modifications; and home sales volume, with a focus on short sales and discounters properties...since our concern in following this report has been homeowners who are in trouble, we'll include a few graphics below to expand on homeowners who remain in foreclosure....

as the far left margin tells us, this first graph below, from page 10 of the Mortgage Monitor, shows the percentage of those homeowners who have been in foreclosure for more than two years from the beginning of 2008 to the present, with the percentage for judicial states shown in blue, the percentage for non-judicial states shown in red, and the overall total percentage of homeowners who have been in foreclosure for more than two years shown in black....you can see that prior to 2009, almost no non-judicial foreclosures were taking more than two years, and only a few foreclosures in judicial states were thus tied up...as of June, more than 57% of all homes in foreclosure had been there more than 2 years, with over 61% of homes in judicial states so encumbered...as we've pointed out, the mortgage banking industry blames the delay in foreclosures on the courts, but note that even in non-judicial states, where the court proceedings are unnecessary, roughly 42% of foreclosures are now taking more than 2 years…

the next graphic, from page 11 of the mortgage monitor pdf, is a map of the lower 48 states showing the average number of days those homes in foreclosure have been delinquent on their mortgage, which in this graphic BKFS says has grown to 995 days nationally...the states are color-coded such that those states where the foreclosure pipeline is the longest are in the darker shades of red, and the states where the foreclosure proceeding are the shortest are in the darkest green...so the average length of time of mortgage delinquency for homes in the foreclosure process runs from 475 days in Wyoming, 520 days in Nebraska, and 525 days in Michigan 525 at the low end to 1246 days in Florida, 1276 days in New Jersey, 1285 days in the District of Columbia to 1350 days in New York at the high end...an inset below the map also notes that the average length of time of delinquency for foreclosed homes in judicial states has grown to 1084 days, in contrast to 775 days in non-judicial states...understand that these are averages, and thus some newly foreclosed homes may well have been delinquent as few a 90 days; thus, it's likely that a fair percentage of homes that were foreclosed on as early as 2008 and 2009 are still in foreclosure today...

finally, for an overview of how this foreclosure crisis has played out from the beginning, we’ll also include, from page 23 of the pdf, a portion of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status...the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages in the foreclosure process, the total non-current mortgages, including those that just missed one or two payments, and the number of foreclosure starts going back to January 2008, with monthly data since January 2013….then, in the last two columns, we see the average length of time those who’ve been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…here we can see that the total of non-current mortgages ballooned to 7,680,916 in January 2010 and has now dropped to levels lower than those of 2008....we can also see that although the count of monthly foreclosure starts peaked in 2010, the count of those in foreclosure continued to rise until 2012 as the average time of mortgage delinquency for homes in the foreclosure process lengthened...and although the total counts of both mortgages that are seriously delinquent and those that are in foreclosure has fallen considerably, the average length of time for those who have been delinquent without foreclosure remains at 502 days, while the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 997 days...

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts,contact me…)

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....